Lender Aldermore and specialist buy-to-let adviser Mortgages for Business launched Keystone yesterday.
Julia Rampen: What are the origins of Keystone?
David Whittaker: It’s a joint initiative between Mortgages for Business and Aldermore. The bank asked us to put together on their behalf to provide a hybrid lending programme.
Keystone in its former life [before the credit crunch] did exactly these sorts of loans so we always knew that there was always a requirement for it. It’s getting the timing right for bringing the proposition back into the market. What you have essentially here is something that is not a vanilla BTL but doesn’t necessarily need or warrant a full commercial underwrite.
JR: How is the funding for Keystone allocated?
DW: Funding for Keystone loans will come out on Aldermore bank note paper. It is within whatever their existing funding lines are. The bank have given us an indication of what they’d like us to achieve in the current year and we’ve been told that if we go beyond that they feel comfortable that they will be able to resource it.
JR: What kind of figure are you hoping to lend?
DW: We’re hoping to get between £35m and £50m drawn before the end of the year. For some of the big players that’s a drop in the ocean, but for a specialist position in the market place we’ll be very content if we get that figure by the end of the year.
JR: Are you hoping Keystone becomes a serious competitor in the professional landlord niche?
Absolutely. What Keystone can do is bring in concept products. Because the command chain within Aldermore bank is fairly short and their senior management team are very experienced on property lending, if we come up with an idea and they like it we can bring it to market quite quickly. Hopefully we will broaden the product range in the first three months or so.
JR: Is Keystone going after Paragon’s market?
DW: No. It’s a segment of the market which no one can put an accurate figure on. Keystone will only do loans up to £350,000 where of course Paragon will quite happily go up to much higher figures. Indeed I’ve had the conversation with Paragon and they are content to see it in there and they’ve wished us good luck.
JR: Given that Keystone used to exist before the crash, is this a re-launch or are there significant changes to the way that you’re operating?
DW: There is a big difference. Pre-credit crunch Keystone was a lending vehicle in its own right, forward selling all of its loans onto Bradford and Bingley’s balance sheet. This time around, the loans quite clearly come off Aldermore’s bank balance sheet. Keystone is an exclusive marketing vehicle with products that are funded by Aldermore bank direct to the customer, but those products are totally exclusive to Keystone and thereby Mortgages for Business.
JR: Why launch in 2012?
DW: Landlords are generally more active. There are many prior to the credit crunch who bought properties in limited companies or owned small HMOs, and they are being squeezed by high street banks. There’s an opportunity to pick up maturing assets with a good track record that aren’t too highly geared.
If you look back at the buy-to-let lending figures, you’ll see that in 2009 and 10 the market was stuck at £8.5bn and £9bn, but last year stepped up by nearly 50% to over £14bn. The prediction this year is £17bn. Now is the time to put your toe back in the market and start up a new product range.
